Fixed-term mortgage rates advised
(6 March 2012 – New Zealand) Bank of New Zealand (BNZ) and Westpac have warned Kiwi homeowners that it is time to move from floating mortgage rates back to fixed-term rates before a rush that could drive up rates quickly.
The advice comes after a sharp rise in overseas borrowing costs for banks.
About 60 percent of all mortgages have moved to floating in recent years because of historically low rates, and recently banks have begun cutting their medium-term fixed rates to win back market share.
Economists say it's unlikely rates will fall much further and are now advising homeowners to lock in the chance of a good rate.
Moving from a floating rate of 5.75 percent to a three-year fixed rate at 6.1 percent would increase monthly payments by about NZ$22 (A$17) for every NZ$100,000 on a 25-year mortgage.
But assuming an average floating rate of 7.3 percent, tipped by Westpac, total repayments over the next three years would be NZ$2721 lower.
'If that is your plan, now is a good time to take advantage of the attractive rates,' Westpac economist Dominick Stephens said.
David Tripe, director of Massey University's centre for banking studies, said a hike in bank wholesale rates last month meant retail mortgage rates increases were likely to follow 'very quickly'.
He suggested anyone with a big mortgage relative to their income should consider getting off the floating wave.
BNZ chief economist Tony Alexander, a long-time advocate of floating, now recommends a conservative three-year fixed term.
About 60 percent of all mortgages have moved to floating in recent years because of historically low rates, and recently banks have begun cutting their medium-term fixed rates to win back market share.
Economists say it's unlikely rates will fall much further and are now advising homeowners to lock in the chance of a good rate.
Moving from a floating rate of 5.75 percent to a three-year fixed rate at 6.1 percent would increase monthly payments by about NZ$22 (A$17) for every NZ$100,000 on a 25-year mortgage.
But assuming an average floating rate of 7.3 percent, tipped by Westpac, total repayments over the next three years would be NZ$2721 lower.
'If that is your plan, now is a good time to take advantage of the attractive rates,' Westpac economist Dominick Stephens said.
David Tripe, director of Massey University's centre for banking studies, said a hike in bank wholesale rates last month meant retail mortgage rates increases were likely to follow 'very quickly'.
He suggested anyone with a big mortgage relative to their income should consider getting off the floating wave.
BNZ chief economist Tony Alexander, a long-time advocate of floating, now recommends a conservative three-year fixed term.
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